Business optimism in Vietnam drops in Q4 2011

It provides insight into the views and expectations of over 11,500 businesses per year across 40 economies.

Grant Thornton Vietnam’s managing partner Ken Atkinson said: “Business optimism and confidence have dropped considerably in the last 12 months as 2011 was the most difficult year for Vietnam since the global financial crisis and the economy is still facing many difficulties.”

“We expect 2012 to be another challenging year as the government continues it's resolve to fight inflation, and restrict credit growth. Whilst exports performed extremely well in 2011, the rate of growth in 2012 is expected to slow and this slow-down could be significant if the EU problems are not resolved,” said Atkinson.

The research suggests that Vietnam has not been affected by a slowdown in trade with only an additional 1 per cent of respondents citing that a shortage of orders or reduced demand has been a constraint to growth.

Not surprisingly the two factors which have been the biggest constraint on growth, in Vietnam, have been the high cost of finance and availability of working capital. More of the respondents also felt that accessing finance would be even more difficult in 2012. However, there was a strong belief that the cost of finance would go down in 2012.

The survey also emphasizes that even Vietnamese business optimism and confidence dramatically dropped. However, the country still remains in the group of countries which have higher optimism and growth.

With the global economic outlook dominated by the crisis in the eurozone, fears are increasing that business growth will become even more difficult than in 2011.

The research shows that global business optimism in the fourth quarter of 2011 stands at net percent, indicating a balance between those business leaders feeling optimistic about their economies in 2012 and those feeling pessimistic. It represents a further deterioration from 3 percent in Q3 2011 and 31 percent in Q2 2011.

Ed Nusbaum, CEO of Grant Thornton International, said: “Heading into 2012, we’re seeing a polarisation of business confidence between Europe and the rest of the world. However, the threat of total meltdown in the eurozone means business leaders remain uncertain about the year ahead – they simply do not know how things will turn out. That uncertainty is sapping confidence and choking business growth prospects.

“The business optimism results mirror the perilous position of the global economy, stronger results for key markets such as Brazil, China and the United States being offset by the lack of a clear resolution to the sovereign debt crisis in Europe.”

The research also suggests global trade is suffering. Having risen by 10 percentage points in Q3, the proportion of businesses citing a shortage of orders rose again in Q4, up five percentage points to 37 per cent globally. This result was largely driven by an increase of nine percentage points across the eurozone, but businesses in North America (up seven) and the BRICs (up four) are also suffering.

In addition, business expectation for increasing revenues and profits fell by two percentage points globally over the last quarter. Regionally, profitability expectations are down significantly in the EU (down 12 percentage points to 13 per cent), but also in Latin America (down 16 to 47 per cent) and in the ASEAN region (down 24 to 33 per cent).